The share of assets under management held by independent advisors grew to an estimated 35.3 percent in 2012, up from 34.3 percent in 2011 and 33.8 percent in 2012, new research shows.
So reports Cerulli Associates in a new study, “Boutique Advisory Firms and RIAs: Balancing Scale and Independence for Top-Tier Advisors.” The survey examines both the immediate and long-term impact of boutique firms in the wealth management arena.
Currently, the report indicates, independent advisors constitute just over four in 10 (40.2 percent) of advisors, a proportion that has changed little since 2007, when they made up 39.6 percent of advisors. Employee advisors still comprise a significant majority (59.8 percent) of the total.
“We’ve seen a significant increase in the independent advisor market share from 29 percent in 2007 to more than 34 percent in 2011,” says Scott Smith, director of Cerulli Associates and author of the research. “As more advisors move toward independence, they become more challenging for managers to address.
“However, by targeting boutique advisory firms, asset managers are able to gain entry into and target this growing market segment,” he adds.
The report defines boutique firms as advisory practices of “limited scale,” focus on “above average advisors” and make advisor-client relationships “central to the firm’s value and revenues.”
Among the report’s additional findings:
An estimated 11 million households comprising the mass-affluent, affluent and wealth markets with between $500,000 and $10 million in investable assets account for 62 percent of total investable assets in the U.S.
Cerulli expects continued growth of the registered investment advisor (RIA) channel, largely at the expense of wirehouse firms, with advisor growth outpacing firm growth as practices continue to add experienced advisors from other channels.
Given regulatory and reputational issues faced by the largest firms and the recruiting efforts of RIA custodians, Cerulli expects more advisory practices to break away to the RIA channel.
Cerulli anticipates continued growth of the breakaway advisory channel, but cautions this model is likely unsustainable for firms with practices with less than $100 million in assets under management.